VW's Slovak workers strike over pay, halt production lines

BRATISLAVA (Reuters) - Volkswagen (VOWG_p.DE) was hit by its first ever strike in Slovakia on Tuesday as workers began a walkout to demand a higher pay increase which could hurt the central European country’s manufacturing output.

FILE PHOTO: A Volkswagen (VW) logo is seen on a car's front at a scrapyard in Fuerstenfeldbruck, Germany, May 21, 2016. REUTERS/Michaela Rehle/File Photo

About 70 percent of VW’s 12,300 employees at its three factory facilities joined the protest, union chief Zoroslav Smolinsky said, adding that production would be hit.

VW said the Bratislava plant halted production lines that make Volkswagen Touareg, Audi Q7, Volkswagen up!, Seat Mii, Skoda Citigo and bodies for the Porsche Cayenne. More than 99 percent of the plant’s output is exported.

It said VW parts and machinery factories in towns of Stupava and Martin were working normally on Tuesday.

The first strike at a major Slovak plant since the 1989 end of communist rule comes as economies across central Europe outpace western Europe, leading to a labor shortage that many companies worry will limit growth.

On Monday, Slovak Prime Minister Robert Fico supported the strike action, which began as labor office data on Tuesday showed Slovakia’s unemployment rate fell to 7.4 percent in May, the lowest since the global financial crisis hit central Europe in 2008.

“Why should a company making one of highest quality and most luxurious cars with a high labor productivity pay its Slovak workers half or one third of the amount it pays to the same workers in western Europe?” Fico said to reporters.

But VW’s Slovak unit said last week that union demands for a bigger pay hike would endanger the plant’s competitiveness within the car group and also job stability.

The VW workers are seeking a 16 percent pay hike and have refused management’s offer of a 4.5 percent raise this year and 4.2 percent raise next year, plus bonuses.

“We deserve at least a double-digit raise,” Smolinsky said.

VW produced 388,687 cars in Slovakia in 2016.

The company pays an average wage of 1,800 euros ($2,008) a month, double the national average.

That figure is also higher than the average salary of 37,000 crowns ($1,577) that VW pays at its Czech carmaker Skoda Auto.

Slovakia’s Finance Ministry has calculated 12 days of an uninterrupted strike would cut 0.1 percentage points off the country’s annual economic output.

Growth is seen at 3.3 percent this year and above 4 percent in coming years, with the auto sector the most important driver. Slovakia, with a population of 5.4 million, makes more than a 1 million vehicles a year making it the biggest per capita auto producer in the world.

Besides VW, Kia (000270.KS) and Peugeot (PEUP.PA) have plants in Slovakia and Jaguar Land Rover [TAMOJL.UL] is building a plant due to open next year.

Peugeot and Kia have raised wages at their Slovak plants by 6.3 percent and 7.5 percent, respectively.